FocusChina MTBE buyers shun imports as prices spike on strong crude

22 November 2012 03:09[Source: ICIS news]

By Ong Sheau Ling

SINGAPORE (ICIS)--Importers of methyl tertiary butyl ether (MTBE) in China have retreated from the market as prices of the product has been tracking the sharp increase in crude values, industry players said on Thursday.

Spot MTBE prices surged by about $70/tonne (€55/tonne) in the week ended 21 November to $1,112/tonne FOB (free on board) Singapore, according to ICIS, following sharp gains in upstream crude prices.

US crude has gone up by more than $2/bbl from two weeks ago, while Brent was up by about $4/bbl over the same period.

“Crude has been going up these two weeks and the MTBE numbers just kept tracking it higher. It is impossible to import now,” a Shanghai-based trader said in Mandarin.

At 10:34 Singapore time (02:34 GMT), US crude was trading at $87.64/bbl, up 26 cents from Wednesday, while Brent crude was at $111.04/bbl, 18 cents higher from the previous closing.

“Up till last week, we are still receiving enquiries, but somehow it just disappeared this week,” a Singapore-based trader said.

In early November, a few spot MTBE parcels were concluded when prices were hovering at the low-$1,000/tonne FOB (free on board) Singapore levels.

“Prices then were really attractive,” another Shanghai-based trader said.

In China, domestic MTBE prices were at yuan (CNY) 8,900-9,000/tonne ex-tank on 21 November, down by about CNY200/tonne from the start of the month, according to C1 Energy, an ICIS service in China.

Prices fell partly on panic-selling of MTBE following an announcement that a new consumption tax will be levied on some petrochemical products starting January 2013, industry sources said.

Products covered by the new consumption tax remain unclear. The tax was supposed to be imposed on crude oil derivatives that are in liquid form under normal temperature and atmospheric pressure and do not meet certain national standards.

Some market sources are speculating that MTBE may be included in the list of products to be taxed.

“It is just very confusing now, we have no idea whether there will be such a consumption tax [on MTBE],” a third Chinese trader said.

MTBE supply in the domestic market, however, is fundamentally on the low side that prices did not weaken significantly in spite of the panic-selling.

Some Chinese importers took a cautious stance and backed off from the import market because of the possible consumption tax on MTBE.

“It is highly likely that MTBE will be imposed with this tax. That doesn’t make sense for Chinese gasoline blenders,” a northeast Asian player said.

If the consumption tax is applied to MTBE, a gasoline blender will have to pay the tax twice since gasoline is subject to a consumption tax of CNY1.00/litre, industry sources said.

MTBE is used to boost the octane levels in gasoline.

Most Chinese importers preferred to stay on the sidelines amid the ambiguity in the new tax policy, while sellers are hesitant to make offers for January spot cargoes.

“Unless this tax issue gets clarified, it is hard for us to determine the rightful selling price,” another Singapore-based trader said.

Downstream gasoline blending demand has started to wane because of a seasonal lull in demand, market players said.

“We may just see prices start slipping from now on [in both the China domestic and southeast Asia markets], if the tax is going to be imposed,” a third Singapore trader said.